HINTS TO INVESTORS

Hokitika Guardian, 22 October 1931, Page 2

HINTS TO INVESTORS

(By “CROESUS”in N.Z. Financial Times). “England, with all thy faults, I love thee still.” “Gold Standard Suspended. Banic Rate 6 per cent.” This .startling message of half a dozen words flashed across the world announcing to all with eyes to read, that Britain had been defeated on a technical knock out after a sterling fight to pay 20s in the £. Sterling was no longer “as good as gold,” and the trade of the British -Empire from now on has to be confducted with wobbling money vary mg in value from day to day according to the whims of chance or to the attnc.vs of foreign competitors. It is now liter, ally true to sav that pound notes cannot, be sold for 18s. They have been for sale at 16s 3d in the principal centres of the world. The suspension of the gold standard in Britain is one of the blackest pages in our financial history. London, the world’'is banker, was unable to pay when a run set in and had to shut her doors on the people who had deposited their money in London. U.S.A. may now be able to get the world’s banking business. WOBBLING MONEY. /» This is not business at all. It reduces business to the level of horse* racing and gambling, Wobbling money means that every investor must be on guard. There is no safety or security in any investment. A pound note may be worth 2Qs or not worth 3d, dependent on such fantastic reasons as to whether Mr Baldwin or Mr Henderson is Prime Minister of Great Britain. There will be great difficulties if Mr Henderson becomes Prime Min-

. Lster with an absolute majority. There can be no safety or security within the British Empire until sterling is stabilised at some point with gold. Whether sterling is 20s, 15s, or 10s in real value, it is even more important that sterling should be definitely fixed at some constant value. Tbe higher it is, the better it will be for the hand-to-mouth wage-earners who will be able to buy more with £4 a week of notes worth 20s, than £4 a week of notes worth 15s. Unfortunately, Great Brit, ain’s National Debt and the taxation necessary to support it and her wage rates, are far too high to allow tier /to compete with European competitors 1 for port markets. Her costs and, therefore, her prices are too high, so that the world does not buy enough British goods bift goes for cheaper German, Japanese or American goods whose lower taxation, ability to finance purchasers, and money to put in mass production machinery has enabled her to pay higher wages and get more business. Machinery, with all due

deference to Mr H. ©. Holland, has enabled 'TL&.Jti'' and Britain to pay higher wages and make cheaper goods than any other countries of the world. Now that Japan, and other countries , are installing modern machinery, wages must fall in English speaking countries or countries without the money .to install improved methods, while wages will tend over a period of time to rise in low standard countries installing up-to-date machinery. Some day, not in our time, all the wage-earners of the world will receive the same weekly pay in purchasing power. Nowadays, a worker in U.S.A. gets an index wage of 197, virtually double the British workers’ 100. The Frenchman is in the seventies, the German in the fifties, and the Italian in the thirties, while the Russian has yet to reach double figures. When Henry Ford wanted to pay all his workers the same wages ail over the world, the International Labour Office at Geneva, had to get some money so as to gather the data to work out the figures. Henry Ford then found he hid to multiply the usual wage roll by >six in some places like Italy, four in others, like Germany, three in others, like France, and by .two in his British factories. Ford had the liiachinei'y. No wonder the Continental Employers’ Federation neariy had a blue fit. It spelt their ruin. However, Henry has had to retrench and pull in his horns a bit. Not enough people have the money to buy Fords to justify further industrial investments.

THE CRISIS ; ' England hfis been defeated on a technical knock-out three times in her goldstandard history. In itlie forties of last • century, during the slump following the •Napoleonic. W.rs, during the World War, and again in the slump following the Great 'Wav. It was necessary that [Britain should suspend the gold standard for a few years. The crippling load of ■debt and taxation was too heavy to be borne and wage rates which had been risen to meet an inflated pound note worth 10s could not be reduced to half to meet a pound note worth 20s. The easiest alternative is to inflate! Ignoramuses in th» ’Labour ranks do not realise that everybody in Britain has had a 20 per cent, invisible wage cut ? Can Britain make a come-back? The answer is that in the past, twice Britain has made a come-back, to pav 20s in the £. It defends upon each one within the British Empire to put his back to the wall to tight for the cause. All is not lost if the people ready to die for the King C"d throw in their fortunes greatly outnumber those of our Socialist c Labour friends who prefer Karl Marx, Z (Frederick Engels. Lenin and Trotsky, t? ;N o t only is old Britain being attacked B ifrom without. She is Being betrayed *3 'f r om within. What can one do with people who prefer to hatch out plots I £o grab the few millions of gold in the I

banks belonging to other people, instead of digging the goicl mn of the ground waiting for the taking ? It is rather distressing to ‘ find that Mr Lang has citizens of Hie British Kinpire spending their days scheming how to draw the dole seven times each week under different names. \\ hat a waste of ingenuity. Thousands <>i' our fellow-citi-zens are singing the Red Flag, and find hois'ting placards Kill the Capitalists" more pleasant work than hoisting a pick and shovel. It is a pity to have ablebodied men and women in thousands wasting time in the Parliamentary grounds running their heads against police batons. If it would knock any sense into them, it might he all right. ■One remedy might be to send all our Lenin and Trotsky admirers free of charge and with £SO to their ideal Stale Russia. There would be no volunteers without the £SO.

BRITAIN'S HOUR OF NEED. Britain has need for every man and every penny. If we art* prepared to put our backs into it, and be satisfied to rough it a bit, we can win easily. Otherwise, we deserve to lose. Unfortunately, Britain in trade, finance and labour circles is notoriously cosmopolitan or international in outlook. The British Empire had better trade within the British Empire, fading sane and sensible international relat onships. The suspension of the gold standard will make Empire Preference more readily possible. One thing is certain that the world will' never be free of baffling problems. ‘Holders of wealth must always guard their hard-earned wealth and savings against burglars whether it is in their home.and against confiscation, repudiation, or inflation when it 'is lent to tbe banks or the Government or anybody else. Nothing is safe. The best Hv.it one can do is

to get the greatest enjoyment out ot life and that is a mental state. There is oo much dissatisfaction and grumbling. A healthy and solvent man has the best chance of attaining tbe mental state of happiness. Hence the need of investors to he out of debt.

Gold is the best investment in the world to-day,as I told my readers last May. The list of investments then published needs revising. Holders of “fixed securities” such as Government Bonds, municipal debentures, mortgages. etc., should transfer half to leading industrials such as Colonial Suger, Burns Philp, etc. Inflation is producing an artificial temporary prosperity which will be short-lived and possibly necessitate further doses of inflation unless such madness stops. Industrialists and producers, like wartime profiteers, have what is left after the ghastly evils of inflation have ravaged a country. Inflation in Britain will only intensely and prolong our troubles. It was necessary to spend the gold standard. The value of wool or other comodities has not risen. The value of money lias fallen. British punnd notes are worth about 16s of their former 20s sterling ■>value. w Therefore for £4 value of wool under the old sterling, you get £5 under the new sterling worth lfis. Any speculation on rising prices will not help and to sav that wool has .risen 20 per cent is faulty logic, New Zealand might benefit temporarily, especially the I'nrmpr, but at too great a price.

The paramount need to-dav is to get the goods consumed. The prices are too high for people to huv them. Hence it is unpayable to use idle labour to make them. Costs, i.e., wages and taxation, should be reduced, simple in theory but difficult in practice. The people complain when they get a 10 per cent cut, and take a 20 per cent invisible cut in the value of money lying down. Costs being reduced would enable prices to be reduced. More and more people and countries could buy as lower standard countries could take butter instead of margarine, fruit, honey, meat, woollen clothes, etc., and the problem would straighten out. •But no. the gold standard i s lost to Britain for a year or two. and may never be restored on a 20/. basis. Hence the British, ana those people allied to sterling, can buy less when they are already not buying enough of the foodstuffs for sale. Wheat, wool, tobacco, etc., etc.. are all in store. To raise prices by inflation is suicidal, as to have the supply in excess of tlie effective demand, the position would tend to get steadily worse, and prices would continue to fall even in terms of the depreciated currency. The restoration of the world to normal after a war is a lengthy and tedious job. It was a Great War. r( will therefore have a depression befitfc. • ing such a great occasion. Investors can look for a further ten years of murmurings of distress and chattering of enrrenov cranks for a non-gold standard of money backed with the se-

curity of the State. These people cannot agree between themselves, and are theorists of an idealist and impractical nature whose vapourings will bo forgotten thirty years hence when the world is peaceful and contented again, Our children then can tell the story of how their fathers lost all the family plate in the slump of the ’thirties. Many New Zealand families tell of how wealthy they were before the bank crashes of the ’nineties took all their money. Dr. Sprague, Economic Advisor to the Bank of England ,is man enougn to tell the truth and sa,y that the banks of the world are powerless to stop falling prices any more than 20 per cent interest stopped the Wall Street boom of rising share prices. He says that the only escape from our present troubles lies in reducing costs of production chiefly at the expense of wages, until th 0 prices of finished goods are brought down low enough for people to buy and sell them at a profit. Agricultural prices are at took bottom and are showing a los s to the producer. Prices of manufactured goods are too high to be sold in sufficient quantities to cope with production. Investors must therefore be pro. pared for heavy losses and waten their securities with unceasing vigiince.